Those who specialise in digital research and development (R&D) will be pleased to hear that there will now be new incentives introduced.
Although in the past, tax reliefs for R&D have been generous for small companies with 230% deductions in qualifying costs, the categories of expenditure that qualify for these reliefs were defined more than 20 years ago. This meant that they did not include the costs of a typical internet business.
However, from April 2023, cloud computing and data costs will now be added to the list of qualifying expenditure categories and, therefore, quality for the R&D relief. For the time being, this is still a very broad concept, so we will need to wait for HMRC guidance and the new law to determine precisely what will qualify.
Unfortunately, as the R&D tax relief scheme has been the target of abuse and fraudsters, the Government will become stricter to clamp down on these issues. Compliance will be greatly improved through various measures such as limiting the R&D tax relief to work undertaken in the UK. We should have more information on the conditions in the coming weeks.